Revocable Trust vs. Beneficiary at Death.

[GravitySucks]

DM is finally doing a will. The attorney has us leaning to a revocable trust as the money would flow to the 3 children.
All the money is held in a savings bank. No real estate involved.
It seems the trust just helps avoid probate. Would having the bank accounts set with 3 beneficiaries listed on the account do the same thing?

What other reason would a revocable trust be worth persuing

 

[OldShooter]

If you don't trust your attorney to give you answers to these questions, you need another attorney.

 

[Dash man]

The reason to have a trust is so someone can be the Trustee to manage her financial affairs if she becomes incompetent to do it herself. This can be done with POAs, but some institutions are hesitant to accept them.

 

[Gill]

Would having the bank accounts set with 3 beneficiaries listed on the account do the same thing?

What other reason would a revocable trust be worth persuing

One major advantage of a RLT is that it can serve to protect you and manage your assets for you in the event of your disability and inability to manage your own affairs. A beneficiary designation does not accomplish that.
Gill

 

[pb4uski]

OP, are you talking about a big amount of money? If not, another option might be to just have the savings account be in DMs name with one or all of you as co-owners... assuming that you and your siblings all trust each other.

When your DM passes then the joint owners own the account and no need for probate.

The down side is that technically, any co-owner could go into the bank and clean out the account at any time after the account is established... before or after DM passes.

Also, technically, the account could be an asset if any owner was sued. So there are some downsides but when your DM passes it is easy peasy.

My aunt and I were co-owners on a great aunt's account... when she died technically we could have just taken the money, but it wasn't our money so we just distributed the balance consistent with the terms of her will but we didn't have to go through probate. Since I wasn't in the will I didn't get anything even though I was a co-owner... I was fine with that.

 

[GravitySucks]

OP, are you talking about a big amount of money? If not, another option might be to just have the savings account be in DMs name with one or all of you as co-owners... assuming that you and your siblings all trust each other.

When your DM passes then the joint owners own the account and no need for probate.

The down side is that technically, any co-owner could go into the bank and clean out the account at any time after the account is established... before or after DM passes.

Also, technically, the account could be an asset if any owner was sued. So there are some downsides but when your DM passes it is easy peasy.

My aunt and I were co-owners on a great aunt's account... when she died technically we could have just taken the money, but it wasn't our money so we just distributed the balance consistent with the terms of her will but we didn't have to go through probate. Since I wasn't in the will I didn't get anything even though I was a co-owner... I was fine with that.

It's about $225,000 but I'm assuming at least half to all will be eaten up on expenses. Almost all of it is a settlement from a 2018 auto accident. I doubt she ever had more than $5k in the bank at once before this.
We discussed joint owner ship but the odds of someone having the asserts seized exists. Was thinking I could just be joint owner but doubt that would go over well.

 

[Gill]

Why not just leave it in her name and put the dispositive provisions to the children in her will? Avoiding probate is often unnecessary because in most states it is neither difficult, expensive or burdensome.
Gill

 

[Dash man]

Yeah, leave it in her name and adjust the will for the beneficiaries. Contact her bank and find out if they will accept a power of attorney should your mother be incapable of managing her finances. Don’t forget to also do a healthcare power of attorney for her, whether it’s to one child or all of them.

Edit: While you’re at it, get a living will for her so you can follow her wishes.

 

[googily]

The reason to have a trust is so someone can be the Trustee to manage her financial affairs if she becomes incompetent to do it herself. This can be done with POAs, but some institutions are hesitant to accept them.

This.

 

[savory]

Yeah, leave it in her name and adjust the will for the beneficiaries. Contact her bank and find out if they will accept a power of attorney should your mother be incapable of managing her finances. Don’t forget to also do a healthcare power of attorney for her, whether it’s to one child or all of them.

Edit: While you’re at it, get a living will for her so you can follow her wishes.

This is what I just did. Kids have power of attorney. I also completed Five Wishes. After conversation with my attorney, I felt will and related documents, like Power of Attorney, would work for us.

 

[GravitySucks]

Thank you.
I shouldn't have stated he was leaning us towards a trust as he gave us options and explained the pluses and minuses of them. Everyone in the room liked the Revocable for Moms benefit, but since she won't need a Trustee external of the family I'm rethinking the options.

 

[PatrickA5]

I'd just set it up as POD/TOD with the 3 beneficiaries. I don't really see a reason to go through probate for what will probably end up being a small account.

For my late DF's primary savings accounts we just put me and my brother as joint owners. Everything else (including the house) was TOD/POD. No probate was needed.

 

[Sunset]

We are just wrapping up an estate now.

The POD/TOD on bank accounts and annuities, made it all simple, easy and pretty quick to distribute money to the heirs which were the beneficiaries on everything. <edit> And avoided the probate !

The Will of course is needed to catch all the little stuff that gets overlooked.

I have a relative that has a trust, he is totally sold on the trust idea. He has changed the trust over the years due to various folks dying, at quite a large cost each time. Especially when compared to the cost of changing names on a bank/account TOD form.

I think a Trust is good when little kids or disabled folks are involved.

I wonder how many lawyers recommend using TOD/POD instead of a trust and miss out on the fee they will generate.

 

[OldShooter]

... I think a Trust is good when little kids or disabled folks are involved. ...

It's IMO a little more general than that. A trust gives the grantor a degree of control over the money after death, IOW limits the beneficiary's control. Two of our grands will have trusts to support their education but not their possible urge to own Ferraris or Corvettes. Balance of trusts after educational expenses is distrubuted per the terms of the trusts. Special needs trust for third grand is constructed to suit legal requirements specific to their state. Fourth trust, for DS, is primarily to ensure the money is managed well and to avoid him being exposed to hucksters. He is a very trusting soul and not financially oriented; he knows and is grateful for having the trust to protect his money.

 

[MuirWannabe]

It's IMO a little more general than that. A trust gives the grantor a degree of control over the money after death, IOW limits the beneficiary's control. Two of our grands will have trusts to support their education but not their possible urge to own Ferraris or Corvettes. Balance of trusts after educational expenses is distrubuted per the terms of the trusts. Special needs trust for third grand is constructed to suit legal requirements specific to their state. Fourth trust, for DS, is primarily to ensure the money is managed well and to avoid him being exposed to hucksters. He is a very trusting soul and not financially oriented; he knows and is grateful for having the trust to protect his money.

All good examples. Another is for an heir with addiction issues.

 

[Happyras]

So I thought I understood this pretty well, but I just do not see how the POD/TOD structure prevents an estate from probate. Say the last spouse on the accounts dies, and the survivors receive the accounts. I would think the state and feds would not be so happy to not have the estate pay death taxes. I thought the probate process aggregated the net assets for taxes due to both the state and feds. Without a trust structure to preserve state and federal exemptions, I would think these taxes would be due. I am assuming the surviving spouse had assets in excess of the state and federal exemption prior to death. The TOD/POD structure would not exclude those assets or am I missing something stupid here.

Edit, so I see the probate is avoided, but the accounts/assets are still considered part of the estate for creditors and taxes. To me, it sounds like POD is not the way to go as it confuses the whole process of estate settlement AND does not preserve exemptions like a QTIP trust would otherwise provide for using a Clayton provision for the surviving spouse.

For a simple estate, I can see POD is useful, but when taxes or creditors come into play it creates a mess.